"Trading void? Do you need something to do?" I was referring to the low volume trading days we've been witnessing.
"I've got the algos working. I could go high-touch and f*ck everything up, if you want."
"No, that's OK. Keep up the good work."
Smartass trader. I suppose I had that one coming, though.
The trading landscape certainly has changed over the past 10 years. Historically, trading was accomplished using brokers or middlemen of some kind. Buy side traders who wanted to buy 100K shares of stock XYZ would contact sell side traders and indicate their interest in stock XYZ. The sell side trader would seek out a seller of stock XYZ and make a trade.
The process is not unlike buying and selling houses where a real estate agent acts as the middleman bringing buyers and sellers together. This process is still in place today, but it's role is diminishing. Today, the brokers that are the most valuable to the buy side are the ones that commit capital to complete a trade (i.e., the trader takes the stock onto his own books and then seeks to sell it later).
Advancements in technology have led to more and more trading being done electronically. In electronic trading, the broker is no longer needed. An electronic platform takes the place of the middleman and matches buyers with sellers electronically. This is where algorithmic trading comes into the equation as traders use the algos to optimize their trading in the electronic platform and reduce execution costs.
Like almost anything tech, this advancement has brought out the geeks. The opportunity has been created for math geeks and computer programmers to work on Wall Street. Take a look at some of the requirements I pulled from recent job postings:
"PhD in Mathematics"
"Advanced Degree in Mathematics, Statistics, Engineering, or Physics"
"Familiarity with R, Matlab or S-plus"
"Strong programming skills in C++ in a Linux environment"
Don't have any of those skills? Don't worry, neither do I. The world of Wall Street is not going to be completely turned over to the quants anytime soon, so my fellow Finance majors don't need to worry.
However, if you have a math, engineering, or computer science background and are interested in getting a job on Wall Street, the opportunities available have never been better than they are today.
- Traders vs. Investors – Who Do You Want to Be?
- The Future of Active Management: Are Buy Side Analysts About to Become Extinct?
- How to Start a Hedge Fund … and Buy that House with the Pool and the Pond
- The Path to Investment Banking: Become a Helicopter Pilot?
- The Investment Banking Path to a Hedge Fund: Is it Necessary?